KYC Full Form

Full Form of KYC

KYC stands for Know Your Customer. KYC is designed to protect the financial organisation from fraud, money laundering, corruption, and terrorist financing. The process is completed by following some important steps which are described in this study. Besides this, KYC is very important in the banking service as this is the most important financial organization. This study discussed several important components and pillars of the “Know Your Customer” service in banking in detail. KYC is an important standard that plays an impotent role in the financial organization. This study has discussed the role and application of KYC. KYC is such a service that helps to identify risk factors of financial organizations like banks.

Meaning of KYC

KYC is designed for protecting financial institutions against corruption, fraud, terrorist financing money, and laundering. Definition of KYC is a standard that is used in the investment industry for ensuring investment advisors know detailed information on the risk tolerance of their clients, financial position, and investment knowledge of the clients. The “Know your customer” standard helps to protect investment advisors and clients of the financial organization. KYC is completed with the help of some processes or steps, which are listed below:

• Established identity of the customer
• Understand and Identify the nature of the activities of a customer
• Assessment of risk of money laundering with the customers

Those steps are very important during KYC as successful KYC help in the risk management process of the financial organization. The process of “Know Your Customer” is also described as the policies and requirements which are connected with risk management, transaction monitoring, and customer acceptance policies. In another term, KYC is defined as a set of standards that is used within the financial services industry and investment to verify customers, their financial profiles, and risk profiles. This standard is very much important for various financial organizations and helps those organizations and customers to get trustable service.

Components and Pillars of KYC in Banking

In the year 2002, the Reserve Bank of India introduced the “Know Your Customer” guideline in banks. There are four pillars or key elements are founds in the KYC policy of banking, those are:

• Customer Acceptance Policy
• Customer Identification procedure
• Monitoring of Transactions
• Risk management

There are some documents needed in the bank to complete the KYC process of a customer. Those documents are Pan Card, Voter card, Aadhar card, Passport and address proof, and legal name of the customer. Those four pillars are also known as the important components for financial organizations like banks to complete the KYC process. The Reserve Bank of India is providing some definitions of the customer, based on those pillars or components. For the purpose of KYC, the definition of a customer is an entity or person who maintains a business relationship or an account in the bank known as the customer. The first component of Policy Customer acceptance policy is developing a clear idea about the appearance of customers. Customer identification helps to identify the appropriate and original customers for the organization. Monitoring of transactions is helping the Bank to key an eye on the traction process of customers and identify the risk.

Importance and Application of KYC

KYC is such a standard that helps to verify and identify the original identity of the customers by reliance and independent data sources and information and documents. This identification is important to the banks as it helps to identify individual customers of the organization by monitoring recent addresses, photographs, and other identification documents. The process of verification is applicable to the individual customers, for non-individual customers, the bank verifies data from legal status, beneficial owners, and several sources of data. KYC is a financial organization to identify the nature of employment of the customer and the identity of the customer. This process is important as this helps in the risk management process of the bank. The KYC guidelines are important as they help to prevent the use of criminal or risky elements during the laundering of money in the bank.

Conclusion

It is concluded that this study provided a detailed idea of the “Know Your Customer” service and gave its definition. In the study that is seen KYC plays an important role in the identification of customers in the financial organization. This study also discusses key components of the KYC which help to understand the importance and function of KYC in a Bank. There are various processes that help to complete the KYC process in a bank of a customer; those are online, offline, and biometric authentication. Therefore it is concluded that this study discussed various components and importance of KYC and gave a clear idea of “Know Your Customer”.